Thayer Consultancy Background Brief:

ABN # 65 648 097 123

Where to in U.S.-Vietnam
Relations After Visit by U.S.
Treasury Secretary?
July 24, 2023

Speaking in Hanoi, U.S. Treasury Secretary Janet Yellen stressed 'friendshoring' and
called Vietnam a 'trusted partner', citing U.S. investment in Vietnam’s semiconductor
manufacturing sector.
Q1. Why is Vietnam trusted by the United States in reshaping the U.S. supply chain?
ANSWER: Secretary of the Treasury Janet Yellen’s remarks must be placed in the
broader context of agreement by President Joe Biden and General Secretary Nguyen
Phu Trong to exchange visits to each other’s country and to promote bilateral relations
possibly to a strategic partnership this year.
Secretary Yellen referred to Vietnam as a “trusted partner” on the basis of how the
two countries worked through and resolved U.S. concerns over Vietnamese money
laundering. Secretary Yellen was also expressing the view that it was in the interest of
both parties to cooperate in trade matters, including secure supply chains. The United
States is Vietnam’s largest export market. The U.S. needs reliable access to
semiconductors and supply chains outside of China.
Q2. Will closer economic integration lead to political re-alignment between
Washington and Hanoi and break the equilibrium that Hanoi has gone at length to
strike between Washington and Beijing?
ANSWER: Vietnam and the United States already have a substantial economic
relationship. The further development of this relationship will be based on mutual
benefit. Vietnam may agree to raise bilateral relations to a strategic partnership but
will not align with the U.S. against China. Vietnam will still pursue its policy of
“diversification and multilateralization” of relations through its network of seventeen
strategic and comprehensive strategic partners. Vietnam conducts its foreign relations
through a multilateral framework not a binary one; this includes maintaining
equilibrium with relations with Japan, India, South Korea, Australia and other partners.
Q3. How is such a move perceived by Beijing? Is the Vietnamese leadership willing to
antagonize Beijing to get economic benefits from the US? Why or why not?
ANSWER: China and Vietnam manage their economic relations through the
framework of a Joint Steering Committee for Bilateral Cooperation. Both are members
of the Regional Comprehensive Economic Partnership.
 2

China has a large surplus that includes raw materials and other products that are
needed in Vietnam’s industries that export to the global market. At present, the major
issue is removing the customs barriers to cross-border trade on Vietnamese
agricultural exports, the resumption of commercial air flights and upgrading rail
interconnectivity. Vietnam encourages Chinese investment in hi-tech and green
industries.
China is more concerned about Vietnam’s potential security and defence relations
with the United States than it is with their bilateral economic relations. Beijing,
however, is extremely sensitive to any U.S.-Vietnam economic relationship that
undermines China’s interests. But China also seeks to gain entry into the
Comprehensive and Progressive Trans-Pacific Partnership. China needs the support of
all signatories, including Vietnam, and this constrains China to a certain extent.
At the same time, China is also seeking to improve its economic relations with the
United States. China wants the Biden Administration to remove Trump-era tariffs and
stop discriminating against Chinese companies and investors by “decoupling” trade
relations and seeking alternate supply chains. China is particularly motivated because
its attempts at post-COVID economic recovery are facing numerous difficulties. China
too needs reliable access to the U.S. market.
In sum, neither Beijing or Hanoi view economic relations as a zero sum game. They are
sanguine about multipolarity and economic interdependence.

Suggested citation: Carlyle A. Thayer, “Where to in U.S.-Vietnam Relations After Visit

by U.S. Treasury Secretary?” Thayer Consultancy Background Brief, July 24, 2023. All
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Thayer Consultancy provides political analysis of current regional security issues and
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